Ms Xia Li, Questrom School of Business, Boston University, USA
How do firms adapt to the risks posed by climate change? Many studies have considered business adaptation to short-term shocks and business cycles, but few have investigated risks that resemble those posed by climate change: long-term, systemic, and irreversible. In this paper, Xia Li builds a novel dataset that compiles information on the adaptation strategies of publicly traded companies across the globe and merge it with climate science data. Using this data, she examines whether, how, and under which conditions firms adapt to physical climate risk. She has found that firms take a targeted approach to adaptation – responding more to those aspects of climate risk that are likely to affect them directly. She shows that firms with better environmental and social performance ratings are more responsive to varying climate risks. She then reports evidence that perception and capabilities may provide the mechanism for different adaptation rates.